Student Loan Consolidation

When many loans turns burdensome for students to repay the loan amount the best solution is Student Loan Consolidation. Consolidating your Federal Student loan can simplify your payment as you don't have to worry about different payment dates and rates. To know more about Consolidated loans read this article.

Posted by Navya B on 16th February 2018

Student loan Consolidation

The federal government of United States provides many loans to the students for educational expenses. Financial aids can be divided into many kinds of the grants and scholarships.

  • Student loan consolidation is very helpful for students who require helping hands.

  • Sometimes in federal student loans, the federal government pays back the loan for some eligible students based on some requirements.

There are many more reasons for a person or a student’s family for not being able to pay the interest amount.

The best solution for this problem is student loan consolidation. It is nothing but combining all the student aid loans to help them reduce the interest rate and help them pay the loan in an easier manner. 


Why opt for Student Loan Consolidation?

Student Loans are provided by several federal, state governments and private organizations.

  • Student loan consolidation helps you to combine all the student and parent loans to make it a big amount.

  • It is helpful to combine many multiple loans and consolidate it so that instead of multiple times of getting the amount, the loan can be integrated and a large amount of money can be summed up together.

  • A student or his/her parents can get the loan in a consolidated form, it can be from the same lender and the amount of money need not be split and can be emerged into a single monthly payment. 


What types of Loans can be consolidated?

Only a few types of loans can be done. Under the direct student loan, consolidated loans are


What are the similarities and differences between subsidized and unsubsidized Stafford Loans?

First of all, both are student aid loans. They are federal student loans for eligible students and their parents pay the tuition fees and other financial support for the education.

  • Subsidized loans are highly preferred compared to unsubsidized loans.

  • Subsidized loans are for graduate students and unsubsidized students are for both undergraduate and graduate students.

  • In the case of subsidized loans the school or college will decide the amount of loan you should be taking as the loan but in the later one, you have the chance to decide what and how much of amount you want etc.

  • Indirect subsidized loans, the federal government will pay the interest on the loans. And in unsubsidized loans, you should be paying the interest on the amount of loan taken.

To know more about Subsidized vs. Unsubsidized loans, Click here


How do you consolidate your student loans?

  • One can consolidate their student loans and the government will pay them off and it will be replaced later with the direct consolidation loan.

  • A student is eligible to assert a loan either by leaving a high school or should be a graduate.

  • Consolidation is free of cost when you apply for a consolidated loan through the education department.

  • The interest rate for the consolidated student loans will be the average of the previous loan interests. It will be increased to the one-eighth of the 1% interest.

  • For example, if the interest rate was 4.15% previously then the average of its previous other series of interest will be 4.45%.

  • Student loan consolidation calculators are used to calculate and compare the monthly payments and interest amount. The calculators are used, to sum up, the loan payment 

Private Student Loan Consolidation

Private student loans are provided by or monitored by private organizations. Many private loan consolidations have higher rates of interests and based on the credit score.

Benefits of private Loan Consolidation are:

  • You can enjoy a potentially lower amount of monthly payment.

  • One can choose from a competitive fixed or variable interest rate option when you apply.

  • You can reduce your loan cost by qualifying for the government's interest rate discounts.

  • No need to pay for application, origination or early repayment fees.

  • Private student consolidated loans usually give you very much lower interests rates and it becomes easy for a person to repay the principal amount or the interest amount monthly.

Who is Eligible to take Student consolidated loans?

There are few criteria for a student to get approved for the student loan. The qualifications are as mentioned below

  • You need to be a US citizen.

  • A candidate should be 18 years or older to attain this scholarship.

  • You should pass a credit check.

  • You should not have a loan debt of $150,000 in aggregate, above this amount is only for specific graduate degree only.

  • And your repay history should be clear for future loan consolidation.


What types of loans are not acceptable?

  • Student consolidated loans are not available for K-grade to 12-grade education.

  • Post-graduation education loans (example: residency exams, bar exams loans)

  • Loans are not allowed for few qualified education expenses.

  • Loans which gets originated from outside the United States.


Conclusion

This article would have given you a better understanding of what student loan consolidation is and why it is important. Student loan consolidation is really beneficial for students and it is the right choice for your goal to simplify the process and you can keep your options for many repayment plans are available for federal loans. This loan gives low levels of interest rates and it is nearly 1/8th of the 1% and it scales down the burden for a student to pay the loans.


FAQ

  1) Is it better to consolidate all my student loan?


It is similar to refinancing a loan. If you want you can consolidate all of your loan or even some of them. This can be a good strategy to lower monthly payment but it increases but it extends the repayment duration. It is a way to get out of default and back into current repayment.

  2) How does student loan consolidation affect my credit?


By Consolidating your student loan your credit score can get a small hit; but after that, if you would keep on doing on-time payment of your loan, it will positively impact your credit score. 

  3) What are the disadvantages of consolidation of student loan?


Some of the disadvantages so this can be; you might end up paying more interest as the repayment window is long. There would be no grace period the repayment period starts immediately upon consolidation and the first payment will be due in around 60 days. If you were a credit score defaulter there would not be any immediate credit score benefit. You will lose your right for the forgiveness of the loan.

 

  4) Do banks refinance student loans?


Yes, most banks do refinance the student loans. For this, most of them will look at your credit score, annual income, savings, and college degree type. And if you meet certain standards set by them then only you will get your student loan refinanced.

  5) Is it good to consolidate debt?


If you are hopeless and you are drowning in debt, you can't negotiate more to reduce the interest rates. Then consolidating student loan will be a good decision for you. This will certainly reduce your per month interest that you have to pay.